Government delays economic plans to soften Covid-19 blow

. Apr 02, 2020
Government delays economic plans to soften Covid-19 blow

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We’re covering the government’s struggles to get financial aid to low-income Brazilians as the coronavirus crisis deepens. The “definitive split” between Jair Bolsonaro and Congress. And the struggles of Brazil’s healthcare system.


Measures to cushion crisis get stuck in Brasília

President Jair Bolsonaro has said, time and again,

that his top priority is preserving Brazilians&#8217; purchasing power and avoiding economic collapse. Therefore, it becomes all the more puzzling when his administration delays enacting emergency financial measures to assist low-income citizens. It took Mr. Bolsonaro 48 hours to ratify a bill creating an emergency BRL 600 monthly salary for informal workers —&nbsp;but now the government claims it needs more legal protections to raise the public deficit.</p> <p><strong>What is happening.</strong> The Economy Ministry says it needs a constitutional amendment greenlighting new expenses before going ahead with the payments. However, House Speaker Rodrigo Maia pointed out that Brazil&#8217;s fiscal responsibility laws give the president spending powers when approved by lawmakers. Even a member of the Federal Accounts Court stepped in, calling the government&#8217;s stance a &#8220;<a href="https://twitter.com/DantasBruno/status/1245161023440670725">serious and negative move</a>.&#8221;</p> <ul><li>In a best-case scenario, the benefits will start reaching citizens between April 10 and 15. But this timetable could be delayed further.</li></ul> <p><strong>Why it matters.</strong> Informal workers generally do not receive paycheck, instead being paid on a daily or weekly basis, meaning that they are already feeling the pinch of the coronavirus pandemic and the isolation that goes along with it. The longer it takes for them to get their money, the more likely a social crisis (and possibly unrest) gets.</p> <ul><li>A study released by the Data Favela Institute shows that one week in isolation is enough to lower living standards of 72 percent of the 13.6 million people living in favelas. And one-third will have trouble buying basic goods such as food.</li></ul> <p><strong>Meanwhile … </strong>The government presented a plan allowing companies to reduce salaries by up to 70 percent for three months, as a way to avoid massive layoffs —&nbsp;promising that the government will compensate workers. Unions considered the move a much better plan than the <a href="https://brazilian.report/business/2020/03/23/bolsonaro-new-decree-comes-in-for-criticism/">decree signed by President Bolsonaro</a> almost two weeks ago&nbsp;that allowed employers to suspend contracts with no protection for workers whatsoever. Still, given the government&#8217;s wavering on releasing funds, it remains too soon to predict the effects on households.</p> <ul><li>Workers with high-paying jobs will be hit hard by this decree — as they won&#8217;t receive full compensation for wage cuts. And it there are glitches in the compensation system, it could quickly erode Mr. Bolsonaro&#8217;s support among the middle class.</li><li>Unlike other world leaders, the Brazilian president has <em>lost</em> support over the coronavirus pandemic, according to opinion polls. Even in Italy, where authorities fumbled on the crisis and allowed a worst-case scenario to materialize, voters&#8217; trust in the government increased.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/1772571" data-url="https://flo.uri.sh/visualisation/1772571/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Congress and Bolsonaro —&nbsp;a definitive split on the way</h2> <p>The heads of both congressional houses made a very significant political move yesterday, which flew under the radar of the Brazilian press. House Speaker Rodrigo Maia and Senate President Davi Alcolumbre decided to radically shorten the deadline for processing provisional decrees issued by President Jair Bolsonaro during the Covid-19 pandemic.</p> <ul><li>Current legislation demands a maximum period of 120 days for Congress to approve these decrees before they expire, but a newly approved rule cuts this term down to just 14 days.</li><li>Mr. Maia made it clear that this quick turnover would aim to let Congress “correct” any excesses of the provisional decrees issued by the president.</li></ul> <p><strong>Why it matters.</strong> Provisional decrees are an integral part of how presidents manage to pass their agenda. By reducing their deadlines, Congress claimed an even important role in the fight against Covid-19.</p> <ul><li>On March 17, we reported that congressional leaders were keen on placing Mr. Bolsonaro in &#8220;<a href="https://brazilian.report/newsletters/brazil-daily/2020/03/17/congress-wants-to-place-bolsonaro-in-political-quarantine/">political quarantine</a>.&#8221; This is it.</li></ul> <p><strong>Definitive split.</strong> In a conference call promoted by investment bank Bradesco BBI, Mr. Maia said: &#8220;Congress&#8217; relationship with the government has not already reached a definitive split only because of the [coronavirus] crisis. This crisis is an opportunity to rebuild the relationship and get away from an agenda that defends the shutdown of Congress or the Supreme Court.&#8221;</p> <ul><li>Last week, Brasília correspondent Brenno Grillo reported that Brasília insiders are already <a href="https://brazilian.report/newsletters/brazil-daily/2020/03/24/sources-political-leaders-negotiate-bolsonaros-impeachment/">discussing how to oust Mr. Bolsonaro</a>.</li><li>In another move that flew completely under the radar, Supreme Court Justice Edson Fachin published an op-ed about impeachable offenses. At one point, he writes (and highlights the text), that an impeachable offense can happen &#8220;even if there is <em>not, necessarily, criminal misconduct.</em>&#8221; The op-ed does not mention Mr. Bolsonaro once, but the timing for such a topic is certainly a head-scratcher.</li></ul> <hr class="wp-block-separator"/> <h2>Healthcare system collapse more real than ever</h2> <p>Experts say Brazil has yet to reach the peak of the Covid-19 infection curve, with the past couple of days being the worst in terms of daily infections). Still, public and private healthcare units are already suffering from an <a href="https://brazilian.report/society/2020/03/15/brazil-healthcare-system-prepared-covid-19-pandemic/">overburdening of staff and infrastructure</a>. In the state of São Paulo, many units have used up to 38 percent of their beds on Covid-19 patients alone.</p> <p><strong>By the numbers. </strong>According to the Health Ministry, Brazil has 6,836 confirmed Covid-19 infections, with 241 deaths. On Wednesday, there were 1,119 new cases, the second-biggest daily bump since the virus reached Brazil.</p> <div class="flourish-embed flourish-map" data-src="visualisation/1573864" data-url="https://public.flourish.studio/visualisation/1573864/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters. </strong>The actual number of cases, however, could be up to ten times higher due to a sheer lack of testing.&nbsp;</p> <ul><li>A <em>CNN Brasil</em> report suggests São Paulo state authorities have sent out guidelines to healthcare units <a href="https://www.cnnbrasil.com.br/saude/2020/03/31/e-mails-mostram-ordem-para-subnotificar-covid-19-em-37-postos-de-saude-de-sp">telling them <em>not</em> to report all cases</a> of acute respiratory distress syndrome.</li></ul> <p><strong>Outbid.</strong> Health Minister Luiz Henrique Mandetta has said Brazil&#8217;s attempts to purchase PPE and respirators from China have come up empty, after the U.S. made massive purchases from the same suppliers. &#8220;They say there&#8217;s no stock left,&#8221; Mr. Mandetta told reporters.</p> <p><strong>Political rifts.</strong> As hard as managing the health crisis is, Mr. Mandetta also has to deal with political issues. He has been undermined by President Bolsonaro —&nbsp;who opposes the social isolation measures Mr. Mandetta deems as crucial. On Wednesday, the Health Minister was not invited to a cabinet meeting to discuss the use of the drug hydroxychloroquine on critical patients. &#8220;I only work with science, while others work with political criteria,&#8221; said the minister. Many reports suggest he could be fired, and <strong>The Brazilian Report</strong> has confirmed with sources that the president already has a two-name short-list to replace him if it comes to that.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Oil and gas 1. </strong>The Covid-19 outbreak led Brazil&#8217;s National Petrol Agency (ANP) to suspend a round of oil field auctions scheduled for later in the year. A new date has not been discussed.</li><li><strong>Oil and gas 2. </strong>Petrobras, Brazil&#8217;s state-controlled oil and gas company, has once again reduced its output by 100,000 barrels per day. Production cuts now amount to 200,000 barrels per day now, as the company moves to &#8220;ensure sustainability amid the <a href="https://brazilian.report/business/2020/03/10/2020-oil-crisis-disrupt-brazil-petrobras/">worst oil crisis in 100 years</a>.&#8221; Brent crude futures have crashed 60 percent in 2020, causing Petrobras&#8217; shares to drop 53 percent since January 2. Still, current oil prices remain above the company&#8217;s breakeven rate, USD 16 per barrel.</li><li><strong>Taxes.</strong> Two weeks after telling <strong>The Brazilian Report</strong> it wouldn&#8217;t change the tax calendar for individuals&#8217; income tax return filings, Brazil&#8217;s revenue services announced an extended deadline until June 30. The government resisted the move, as “over 90 percent of people submit their forms online,” according to one representative. But after companies got new deadlines, political pressure forced the government&#8217;s hand.

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